Rationing to Avoid Conflict: A Centralized Assignment Problem, with Zephirin Nganmeni, Roland Pongou, and Bertrand Tchantcho
Abstract. Competing interests over scarce resources are a frequent source of conflict and social instability. We study three questions: (1) What is the price of stability—the minimum resource supply required for a conflict-free assignment—given an organization’s influence structure? (2) Which influence structures guarantee conflict-free assignments under fixed resources? and (3) How are resources distributed under such conditions? To address these questions, we develop a centralized assignment framework in which a conflict-averse leader allocates indivisible, identical resources among a finite set of agents. Using a hitting set approach, we characterize the conditions for stable assignments and derive the corresponding resource thresholds, which depend on the organization’s influence structure. Our results reveal a non-monotonic pattern: conflict-free assignments exist in both resource-poor and resource-rich organizations, but may not exist in those with intermediate resources. We apply our framework to several canonical organizational structures, including fractionalized, diverse, majoritarian, and oligarchic settings. Finally, in unequal organizations, conflict-averse leaders tend to allocate resources to more powerful agents, thereby reinforcing existing power dynamics.
Systemic Exposures vs. Facility Vulnerabilities: Policy Efficiency, Ownership, and Mortality in U.S. Nursing Homes, with Roland Pongou, Ghislain Junior Sidie, and Guy Tchuente
Abstract. How does market structure influence the efficiency and distributional impacts of government interventions during health crises? We study this question in the U.S. long-term care sector, where ownership and organizational heterogeneity interact strongly with policy environments. Using data on over 11,000 nursing homes in 40 states during the COVID-19 pandemic, we examine how public health and safety interventions affected mortality gaps between for-profit (FP) and not-for-profit (NFP) facilities. Our analysis reveals that for-profit facilities recorded a 19 percent higher mortality rate relative to the mean compared to not-for-profits, and this gap increased by 39 percent relative to the mean under more efficient interventions. Our structural estimates enable us to interpret policy efficiency causally, distinguishing between the effects of interventions and reactive responses. Oaxaca–Blinder decomposition analyses reveal that external exposures—namely, network centrality, county socioeconomic status, and policy environments—account for the majority of for-profit disadvantage, while internal factors—quality and occupancy—have a lesser impact. Mechanism evidence suggests that staffing resilience, compliance, and network position are key channels through which these effects are mediated. Crisis policies should target systemic vulnerabilities (such as network centrality, county disadvantage, and staffing fragility) rather than relying solely on institutional ownership.
Dynamic Legislative Design: Bill Importance and Optimal Supermajority Thresholds, with Roland Pongou
Abstract. How should legislative rules adapt to the importance of proposed bills? Since Rousseau, political theorists have argued that more consequential policies should require higher supermajority thresholds. We revisit this claim in a dynamic legislative environment where bills can be amended or withdrawn before the final vote. A preference-blind designer chooses the voting rule to ensure sustainability, efficiency, and fair competition among policy options. In sharp contrast to static models, where optimal thresholds always rise with bill importance, we show that dynamic legislatures yield fundamentally different predictions: majority rule is uniquely optimal whenever preferences are strong, and variation in thresholds is justified only when preferences are weak. We derive a closed-form relationship between bill importance and optimal thresholds, showing that these thresholds are systematically lower in dynamic environments. Our findings suggest that dynamic legislative procedures, which allow for amendment and withdrawal, are more effective at mitigating status quo bias.
Cross-policy Effects: Lockdown Stringency, Race, and COVID-19 Vaccine in U.S. Nursing Homes, with Roland Pongou, Ghislain Junior Sidie, and Guy Tchuente, AEA Papers and Proceedings, 115: 457-461
Abstract. In a health crisis, how do early mitigation policies affect the effectiveness of later interventions? Using the lens of the COVID-19 pandemic in the United States, we show that the stringency of early public health and safety interventions increased vaccine uptake among nursing homes' residents and employees; however, the effect was negative in states with low lockdown compliance. This negative effect was exacerbated in nursing homes with a larger proportion of Black residents. The analysis highlights the present-day relevance of the historical mistrust between Black populations and health authorities and how this manifests in long-term care institutions.
The Reciprocity Set, with Roland Pongou, Journal of Mathematical Economics, 102980, 1-15
Abstract. We consider the problem of designing procedures that guarantee policy stability, efficiency, and inclusiveness. For this purpose, we introduce a sequential protocol that embeds clauses granting agents the right to oppose actions not in their interest, retract actions that face opposition, and punish harmful actions. Our analysis shows that coalitional farsighted behaviors under this procedure lead to reciprocal actions. We then introduce a solution concept--the reciprocity set--to predict stable outcomes for effectivity function games. We find that under some conditions, the reciprocity set (1) is always non-empty; (2) only selects efficient outcomes; (3) strategically protects minority outcomes; and (4) is compatible with classical notions of fairness and Rawlsian justice in distributive problems.
Justice, Inclusion, and Incentives [Open Access], with Ghislain H Demeze-Jouatsa and Roland Pongou, Journal of Theoretical Politics, 36(2), 101-131
Abstract. How does justice affect individual incentives and efficiency in a political economy? We show that elementary principles of distributive justice guarantee the existence of a self-enforcing contract whereby agents non-cooperatively choose their inputs and derive utility from their pay. Chief among these principles is that your pay should not depend on your name, and a more productive individual should not earn less. We generalize our analysis to incorporate inclusivity, ensuring basic pay to unproductive agents, implemented through progressive taxation and redistribution. Our findings show that without redistribution, any self-enforcing agreement may be inefficient, but a minimal level of redistribution guarantees the existence of an efficient agreement. Our analysis illustrates the structure of economies and organizations in which fairness and efficiency are compatible. Furthermore, we develop an application to the formation of rent-seeking political alliances under the threat of fake news.
Robust Contracts in Common Agency, with Keler Marku, and Sergio Ocampo, The Rand Journal of Economics, 55(2), 199--229
Abstract. Business activities often involve a common agent managing various projects on behalf of investors with potentially conflicting interests. The extent of the agent's actions is also often unknown to investors, who have to design contracts that provide incentives to the manager despite this lack of crucial knowledge. We consider a game between several principals and a common agent, where principals know only a subset of the actions available to the agent. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts and payoffs and provides a novel proof of equilibrium existence in common agency by constructing a pseudo-potential for the game. Robust contracts make explicit how the efficiency of the equilibrium outcome relative to collusion among principals depends on the principals' ability to extract payments from the agent.
Laissez-faire, Social Networks, and Race in a Pandemic, with Roland Pongou, and Guy Tchuente, AEA Papers and Proceedings, 112:325-29
Abstract. We study the effects of race, network centrality, and policies that tolerate some level of virus spread (laissez-faire) on COVID-19 deaths in nursing homes in the United States. Our analysis uses unique data on nursing home networks and calibration-based estimates of states’ preferences for health relative to short-term economic gains. Our findings suggest that laissez-faire policies increase deaths. Nursing homes with a larger share of black residents experience more deaths, but they are less vulnerable to laissez-faire policies, especially when not central in social networks. Our findings highlight significant interactions between COVID-19 policies, race, and network structure among U.S. seniors.
Supermajority Politics: Equilibrium Range, Policy Diversity, Utilitarian Welfare, and Political Compromise, with Aseem K. Mahajan, and Roland Pongou, European Journal of Operational Research, 307 (2), 963-974
Abstract. The standard Bowen model of political competition with single-peaked preferences (Bowen, 1943) predicts party convergence to the median voter's ideal policy, with the number of equilibrium policies not exceeding two. This result assumes majority rule and a unidimensional policy space. We extend this model to static and dynamic political economies where the voting rule is a supermajority rule, and the policy space is totally ordered. We show that the exact number of equilibria in these settings is an increasing correspondence of the supermajority's size. Our findings have implications for the depth of policy diversity across structurally identical supermajoritarian political economies. We also examine the equilibrium effects of supermajority rules on utilitarian welfare and political compromise under uncertainty.
A Non-Parametric Approach to Testing the Axioms of the Shapley Value with Limited Data, with Victor Aguiar and Roland Pongou, Games and Economic Behavior, 111, 41-63
Abstract. The unique properties of the Shapley value–efficiency, equal treatment of identical input factors, and marginality–have made it an appealing solution concept in various classes of problems. It is however recognized that the pay schemes utilized in many real-life situations generally depart from this value. We propose a non-parametric approach to testing the empirical content of this concept with limited datasets. We introduce the Shapley distance, which, for a fixed monotone transferable-utility game, measures the distance of an arbitrary pay profile to the Shapley pay profile, and show that it is additively decomposable into the violations of the classical Shapley axioms. The analysis has several applications. In particular, it can be used to assess the extent to which an income distribution can be considered fair or unfair, and whether any particular case of unfairness is due to the violation of one or a combination of the Shapley axioms.
Optimal Interventions in Networks during a Pandemic [Open Access], with Guy Tchuente and Roland Pongou, Journal of Population Economics, 36 (2), 847-883
Abstract. We develop a model of optimal lockdown policy for a social planner who balances population health with short-term wealth accumulation. The unique solution depends on tolerable infection incidence and social network structure. We then use unique data on nursing home networks in the United States to calibrate the model and quantify state-level preference for prioritizing health over wealth. We also empirically validate simulation results derived from comparative statics analyses. Our findings suggest that policies that tolerate more virus spread (laissez-faire) increase state GDP growth and COVID-19 deaths in nursing homes. The detrimental effects of laissez-faire policies are more potent for nursing homes that are more peripheral in networks, nursing homes in poorer counties, and nursing homes that operate on a for-profit basis. We also find that U.S. states with Republican governors have a higher tolerable incidence level, but these policies tend to converge with a high death count.
Valuing Inputs Under Supply Uncertainty: The Bayesian Shapley Value, with Roland Pongou, Games and Economic Behavior, 108, 206-224
Abstract. We consider the problem of valuing inputs in a production environment in which the input supply is uncertain. Inputs can be workers in a firm, risk factors for a disease, securities in a financial market, or nodes in a networked economy. Each input takes its values from a finite set and uncertainty is modeled as a probability distribution over this set. First, we provide an axiomatic solution to this problem, uniquely characterizing a valuation scheme called the a priori Shapley value. Second, we solve the problem of valuing inputs a posteriori – that is, after observing output-, obtaining the Bayesian Shapley value. Third, we address the question of rationalizing uncertainty in labor supply in a non-cooperative production game where payoffs are given by the Shapley wage function. We also provide an intuitive condition for the existence of a pure-strategy Nash equilibrium. Illustrations of the theory include an application to fidelity networks.
Vaccine and Inclusion, with Zephirin Nganmeni, Roland Pongou, and Bertrand Tchantcho, Journal of Public Economic Theory, 24 (5), 1101-1123
Abstract. In majoritarian democracies, popular policies may not be inclusive, and inclusive policies may not be popular. This dilemma raises the crucial question of when it is possible to design a policy that is both inclusive and popular. We address this question in the context of vaccine allocation in a polarized economy facing a pandemic. In such an economy, individuals are organized around distinct networks and groups and have in-group preferences. We completely characterize the set of inclusive and popular vaccine allocations. The findings imply that the number of vaccine doses necessary to generate an inclusive and popular vaccine allocation is greater than the one necessary to obtain only popular vaccine allocations. The analysis further reveals that it is always possible to design the decision-making rule of the economy to implement an inclusive and popular vaccine allocation. Under such a rule, the composition of any group endowed with the veto power should necessarily reflect the diversity of the society.
Overconfidence and Welfare in a Differentiated Duopoly, Managerial and Decision Economics, 43(3), 751-767
Abstract. We examine whether owners' decisions to delegate corporate responsibilities to overconfident managers improve welfare. We develop a dynamic model with product differentiation, where firms compete in cost-reducing research and development (R&D) and output. Before firms compete, each owner makes a strategic decision whether to hire an overconfident manager. The results reveal that when R&D technology is less productive, owners hire overconfident managers who overinvest in cost-reducing R&D. These strategic decisions improve welfare when spillovers are small and R&D productivity is low, or spillovers are large, or product differentiation is strong.
An Index of Unfairness, with Victor Aguiar, Roland Pongou, and Roberto Serrano, in Handbook of the Shapley Value, E. Algava et al. (eds.), CRC Press Taylor and Francis, pp. 31-48
Abstract. Aguiar et al. (2018) propose the Shapley distance as a measure of the extent to which output sharing among the stakeholders of an organization can be considered unfair. It measures the distance between an arbitrary pay profile and the Shapley pay profile under a given technology, the latter profile defining the fair distribution. We provide an axiomatic characterization of the Shapley distance and show that it can be used to determine the outcome of an underlying bargaining process. We also present applications highlighting how favoritism in income distribution, egalitarianism, and taxation violate the different ideals of justice that define the Shapley value. The analysis has implications that can be tested using real-world data sets.
On the Dynamic Analysis of Cournot-Bertrand Equilibria, with Aggey Semenov, Economics Letters, 183 (108549), 1-5
Abstract. We consider a setting where firms first invest in cost-reducing R&D. In the market stage, one firm sets a quantity, and another sets a price. We prove that the quantity-setting firm invests more in R&D, has a lower price, and produces a higher quantity than the price-setting firm. We also consider welfare implications.
The use (and misuse) of tariffs in North America: A new trade war? , with Maroula Khraiche and Armando Lopez-Velasco, CBEST Border and Business Briefs, 20 (1), 1-7
Summary. This issue of the CBEST Border Business Briefs explores the economic and political implications of renewed tariffs in North America. It examines the historical evolution of trade agreements—from the Auto Pact to NAFTA and USMCA—and the potential fallout of new trade barriers imposed by the U.S. administration. Key topics include the effects of tariffs on industries, consumers, exchange rates, and unauthorized migration. The report highlights the risks of economic instability, job losses, and supply chain disruptions, particularly in border regions like the Rio Grande Valley. Ultimately, it questions whether protectionist policies will strengthen or weaken North American economies.
Assignment Problems in Spatial Networks, with Zephirin Nganmeni, Roland Pongou, and Bertrand Tchantcho
Centralized vs. Decentralized Production in Networks", with Hector Galindo-Silva and Guy Tchuente